Borrowers cashing out and refinancing to a higher rate may still save compared to tapping into credit cards or home equity lines of credit.

Americans are cashing out home equity by refinancing their home loans, even if it means they’re paying higher interest rates. Nearly 60% of cash-out refinancings in 2018 came with higher interest rates, the biggest share since before the financial crisis, according to a Wall Street Journal story citing data firm Black Knight. “For some homeowners, the trade-off is worth it,” the Journal story said. “While interest rates have crept up, they are still lower than what borrowers would pay if they tapped a credit card or home equity line of credit.” Boosted by refis, lenders originated $700 billion in home loans in the third quarter, the most since before the financial crisis, according to industry research group Inside Mortgage Finance. A big chunk of the cash-out refis were due to debt consolidation – specifically, paying off a home equity line of credit by rolling it into a first-lien. About $6.1 billion of HELOC debt was extinguished that way in the third quarter, the highest in almost two years, according to Freddie Mac data. 

Source: HousingWire